X_SUP

X_SUP Paddle board (X_SUP) company sells stand-up paddle boards(SUPs) & accessories. X_SUP had a great 2014 and anticipates abanner year in 2015. To prepare for 2015 the owners, asked you tocreate pro forma financial statements for 2015.

They would like 2 sets of pro-formas.

One that shows the company operating as it has been (theBusiness-As-Usual scenario),

The Second set that shows financing need if they could takesupplier 2% discounts. To take the discounts they would have to payAccounts Payable in 10 days, so the year-end A/P balance would be10-days of COGS. Inventory and COGS would be 2% lower than in thebusiness-as-usual scenario.

Assumption for Business-As-Usual Scenario

Sales from 2014 to 2015 increase by 25% COGS remain at 70% ofSales GA&S Expense increases to $145,000 Interest Expense willbe 8.5% of the year-end Bank Loan balance Depreciation Expense willbe $10,000 in 2015 X_SUP will purchase $30,000 of long-termdepreciable assets in 2015 Cash, Accounts Receivable, AccountsPayable and Inventory will be the same %-of-Sales in 2015 as theywere in 2014. Common Stock is unchanged. All profits (Net Income)are retained to finance future growth. Bank Loan is the plugfigure. If this is negative then Cash becomes the plug figure.

Assumption for 2% Discount-Pay in 10-daysScenario

Use the assumptions above for the Business-As-Usual scenarioexcept: COGS will be 98% of the BAU COGS because of the 2% supplierdiscount. Inventory and A/Payable must be adjusted for the 2%discount. Inventory will be based on the 2% discount. AccountsPayable will be 10-days of COGS at year-end (Use a 365-day year)Interest Expense will be 8.5% of the year-end Bank Loan balance.Bank Loan is the plug figure. If this is negative then Cash becomesthe plug figure.

Assignment:

Create the pro forma financial statements and highlight the loanneed.

X_SUP
Income Statement	2014Actual	2015 ProForma	2015 ProForma (10 -day AP)
Sales	550,000.00
COGS	385,000.00
Gross Margin	165,000.00
GA&S Expense	110,000.00
Interest Expense	7,300.00
Depreciation Expense	7,500.00
Taxable Income	40,200.00
Taxes (30%)	12,060.00
Net Income	28,140.00
Balance Sheet
Assets	2014Actual	2015 ProForma	2015 ProForma (10 -day AP)
Cash	5,500.00
A/Receivables	22,000.00
Inventory	167,500.00
Total Current Assets	195,000.00
Net Fixed Assets	80,000.00
Total Assets	275,000.00
Liabilities & Equity	2014
A/Payable	39,600.00
Bank Loan (8.5%)	86,000.00
Total Current Liabilities	125,600.00
Common Stock	40,000.00
Retained Earnings	109,400.00
Total Liabilities & Equity	275,000.00	343,750.00